Would We Create Medicare from Scratch?

Ezra Klein asks Alice Rivlin a good question:

Ryan-Rivlin would turn Medicare from a program in which everyone gets Medicare into a program in which everyone gets a check to purchase some Medicare-certified private insurance, and that check grows much more slowly than the current rate of health-care inflation. “The objective,” Rivlin told me, “is to get genuine competition on an organized exchange among comprehensive health plans so they will compete and arguably produce better health care for less money.”

What’s odd about the right’s embrace of Ryan-Rivlin is that the plan basically turns Medicare into the Affordable Care Act. It’s the same idea — regulated exchanges offering certified insurance products populated by subsidized buyers. If Ryan-Rivlin will unleash ferocious innovation that holds costs down, then so too should the Affordable Care Act. So at the end of our conversation, I asked Rivlin, who supported PPACA, if I was missing something. She laughed. “I keep talking to Paul and trying to convince him of that,” she said. “But even if he agreed with me, he couldn’t say so.”

One possibility is that if the creators of Medicare knew how much it would actually cost, they might devise a very different program. While Ryan-Rivlin represents a marked improvement over Medicare as we know it, it’s not clear that this is reason enough to create something like Ryan-Rivlin for under-65s. When we’re surveying the coverage landscape for under-65s, we’re not trying to work our way backwards from an unsustainable single-payer system that has exacerbated cost growth throughout the health system. Rather, we were working with a patchwork system that suffered from a number of pathologies — a regressive system of tax subsidies, a dysfunctional regulatory regime that stifled business model innovation, a lack of transparency with regard to the cost of various procedures and the quality of medical outcomes — that many of us believe PPACA didn’t tackle in a very effective way. 

All that said, I actually think we’d have been better off if the president and his allies had made the case for Ryan-Rivlin for under-65s, i.e., something like the Emanuel-Fuchs plan to use universal vouchers funded by a VAT on all expenditures to achieve universal coverage. Why? Because we’d have had a clearer, more honest debate about the actual cost of providing universal coverage. Moreover, the Emanuel-Fuchs systems would have many administrative advantages over the patchwork system created under PPACA, which creates an unstable equilibrium between ESI and coverage on the exchanges. Had the president been willing to say to the American public that we should create a new consumption tax to pay for everyone’s health coverage, and that we should move beyond ESI and all the headaches it entails, he might have paved the way for other reformers to offer a cheaper safety net approach that also would have involved seriously revising ESI.

Defenders of PPACA will tell us that their political opponents would have demonized an Emanuel-Fuchs plan, but would it have attracted more intense opposition than the approach that was eventually pursued? The political advantage of Emanuel-Fuchs is that its relative clarity and straightforwardness might have proven more convincing to the public than the claims advanced on behalf of PPACA. Who knows? Counterfactuals are tough.

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

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